Snowball Effect on track to 'small profit'
Snowball Effect may become New Zealand's first equity crowdfunder to turn a profit, saying it has grabbed about 70% of the market and smaller rivals are likely to be squeezed out.
Snowball and PledgeMe were the first two companies to be granted equity crowd funding licences under the Financial Markets Conduct Act in July 2014.
Snowball head of platform Josh Daniell says the company he co-founded four years ago is on track to post a "small profit." It reported a loss of $214,720 on revenue of $291,974 last year.
PledgeMe forecast a small loss when it raised capital last year although the company has since said that was "an early number."
Eight platforms have been granted licences under the country's new securities law which added crowdfunding as a new source of capital for early-stage companies. Of those, five have reported annual losses in statements lodged with the Companies Office and the remaining three were late additions who have yet to report.
My Angel Investments closed yesterday, having failed to complete any successful offers and reporting a loss of $36,487 in the year to March 2015.
Snowball has raised about $13.5 million over 15 successful offers since gaining its licence two years ago. This excludes private offers such as its current raise for Squirrel, which is open to wholesale investors and investors who are part of its network.
"At the moment we are focused on developing our product and building a deep, loyal audience of investors," Mr Daniell says. "We now have more than 9000 investors receiving our emails, including more than 650 registered wholesale investors. The average investment size has increased over time."
Mr Daniell expects some of his competitors will fail, saying New Zealand is simply too small to generate "enough activity in the small New Zealand market to justify many marketplaces."
Will Mahon-Heap, co-founder and New Zealand manager of rival Equitise, agrees.
"The industry is growing and reflecting much of what happened in the UK, and there we saw the bigger players begin to dominate and then others followed and tried to occupy different verticals," Mr Mahon-Heap says.
"We don't see that as being a necessary part of the market, or the market being big enough to just specialise in those verticals." A vertical market is one in which a vendor targets companies or individuals with specialised needs.
Among the other three dominant platforms, Trans-Tasman crowdfunder Equitise has raised $3.7 million over seven offers, with two more open.
Mr Mahon-Heap wouldn't comment on the company's balance sheet going into its second year, but says Equitise is the second-biggest player in New Zealand. The local arm of Equitise posted a $34,305 loss in 2015 on revenue of $35,417, having held its licence at the time for just over three months.
PledgeMe – which had focused on philanthropic and artistic fundraising efforts before to getting its equity crowd-funding licence – has hosted eight failed equity offers and raised $3.2 million in 12 successful ones. It posted a loss of $57,332 on revenue of $69,237 in 2015.
Chief executive Anna Guenther says the crowded market makes existing platforms work harder as new competitors arrive on the scene and PledgeMe had protected its market share.
"I think it's going to be really hard for the new competitors coming through. It's going to be hard work for them to get awareness and get companies using them, "Ms Guenther says. "There are already a few players, so it's going to be up to them to have a marked point of difference."
The platform has crowdfunded itself twice, most recently raising $365,820 last July. At the time, it forecast a 2016 loss of $71,071 on a fourfold jump in revenue to $420,420.
Ms Guenther declined to comment on how the company was tracking against that forecast. She is confident there is still a lot of room for growth in New Zealand.
BusinessDesk receives funding to help cover the commercialisation of innovation from Callaghan Innovation.